Author: Bryan Hong

Publisher:

Published: 2012

Total Pages: 72

ISBN-13:

This dissertation examines how managers influence firm behavior and performance. Managers play an important role in the performance and activities of firms, given their decision-making role within organizations. I conduct three separate empirical analyses examining specific factors that influence the impact that managers have on firm behavior and performance. The first chapter investigates the following question: How does the performance impact of supervisor changes differ across levels in a hierarchy? In my results, I find that supervisor changes at higher levels result in more severe performance declines relative to lower levels in the hierarchy, even when accounting for differences in span of control. The findings suggest that reassignment and turnover of managers at higher levels may be more costly for firms, independent of their ability and other individual characteristics. The second chapter examines the following: What is the effect of replacing experienced managers with rookie managers on firm performance? And, how does this change if they are instead replaced with experienced managers? At the individual store level, I observe the behavior and performance effects of management changes when successors are newly promoted store managers, and compare this to changes where successors are experienced store managers that are reassigned. In my results, newly promoted store managers systematically cut costs that briefly lead to profit increases, but ultimately result in profit declines in subsequent months. By contrast, successors that have prior experience as a manager do not make any changes observable in my data, and I find no evidence of performance changes. These findings suggest that inexperienced managers within firms may engage in well-intentioned behavior that may be costly for firms, at least in the short run. However, managerial experience may reduce the likelihood that the same costly behavior is repeated. The results shed additional insight into how managerial experience may matter for performance, and provide a tangible estimate of the performance costs of being a rookie manager. In the final essay, I investigate the influence of top managers on corporate social responsibility (CSR). A growing body of literature suggests that individual managers may play a critical role in determining corporate social responsibility (CSR) activities. However, attempts to quantitatively measure the individual influence managers have on CSR face significant empirical challenges. Estimation methods unable to adequately control for firm-specific factors influencing CSR are likely to overstate the importance of individual managers in their findings. To address these concerns, I use an identification approach allowing for the simultaneous estimation of manager and firm fixed effects, and provide quantitative estimates of the degree to which individual managers might influence CSR. The results suggest that managers do exert some degree of individual influence on CSR outside of firm-specific factors, but that the magnitude of their effect is relatively small. Also, when managers switch firms, I find no evidence of a relationship between their influence on CSR in their first and second firm, suggesting that managers do not exert a persistent influence on CSR independent of the firm where they are employed.